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Expedia's Mass Layoff: To Cut 40% of Orbitz's Chicago Staff

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Expedia Inc. (EXPE - Free Report) plans to cut 40% of its workforce or about 326 jobs at Orbitz. The online travel-booking company acquired Orbitz for $1.6 billion this September.

According to documents obtained by Puget Sound Business Journal, the workforce reduction is expected to be conducted primarily at Expedia’s Chicago headquarters. Reportedly, a few senior members of Orbitz, including the CEO, were laid off on Nov 12. The remaining will be completed over the course of about a year, starting with 90 layoffs on Dec 4.

According to a U.S. Securities and Exchange Commission filing, Expedia would have to pay $150 million in employee severance and compensation benefits. However, the company plans to retain 478 Orbitz employees in Chicago.

Orbitz representative Kimberly McCallum said that the layoffs are expected to be permanent, and this could be considered as a mass layoff.

The restructuring announcement comes two months after the Orbitz takeover. The deal was approved by the department of Justice's Antitrust Division and according to General Bill Baer, assistant attorney, was unlikely to create any competitive risk in the online travel booking market or harm U.S. consumers.

Post acquisition, Expedia became the biggest company in the industry in terms of the number of bookings it handles and a major competitor for leading players like The Priceline Group Inc. and TripAdvisor Inc. (TRIP - Free Report) .

Recently, the company entered into a definitive agreement to acquire vacation rental site HomeAway Inc. that offers an online marketplace of vacation rental accommodations. The buyout, which has been approved by the boards of both the companies, is expected to close early next year.

Expedia has embarked on a massive expansion plan, including acquisitions. This means that while revenue growth continues at a double-digit clip, there are significant integration costs and challenges that management has to focus on. In the third quarter, the company’s earnings of $1.59 per share missed the Zacks Consensus Estimate. However, revenues of $1.94 billion were up 16.5% sequentially and 13.2% year over year, supported by acquisitions.

Expedia shares currently have a Zacks Rank #3 (Hold).

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